How does Marissa Mayer keep selling Yahoo to Wall Street?

A year after she took over Yahoo, CEO Marissa Mayer has helped the company’s stock grow 70%, without really coming up with any new products. Yahoo’s stock is just about ready to cross $30 a share today, its highest share price in 5 years.

The 38-year-old former Google executive is widely being credited for the turnaround, after a slew of CEOs before her came and went, often under controversial circumstances. Wall Street investors have seen her as a steady, smart hand who’s reinvigorating the company.

However, despite Mayer injecting some much needed energy into the Yahoo brand, the numbers remain sobering.  On its latest earnings call (which interestingly, management decided to do via video) Yahoo missed Q2 revenue projections, with revenues remaining flat, as they did in the last quarter and the quarter before that.

Sure its made some big-name acquisitions, but they are mostly companies and apps, some of them are wildly popular, but not quite profitable, point-in-case, Tumblr.  

Apart from its new weather app, and a revamped home page that is performing well, there’s not much innovation going on at Yahoo itself, and its core business is suffering. There’s massive display ad competition from Google and Facebook and the company has notably missed the boat on mobile.

So why then do investors remain bullish on the stock?  Here’s a few reasons:

Yahoo’s stock in Alibaba

The company is reaping the benefits of its 24% stake in the Chinese e-commerce giant Alibaba, which tripled its net income in the first quarter of the year and surged ahead in its revenue by 71%. Alibaba is also expected to go public at the end of this year which could give Yahoo another surge of cash, funds it could use for even more acquisitions. During its earnings call, CFO Ken Goldman focused heavily on Alibaba’s performance, showcasing its awesome growth instead of Yahoo’s.

Great presentation:

The Yahoo earnings call was a perfect example of how Mayer and her team were able to spin lackluster numbers into minor bumps on the road to success. Mayer is an engaging and charismatic leader, and by using video for the earnings call, she was able to direct the audience focus away from the revenue figures. By using charts, talking about future plans and by focusing heavily on the results of Yahoo’s golden egg – its stake in AliBaba – Mayer was able to make the whole thing look very positive. Or at least she gave the indication that positive things were going to happen.

Innovation through acquiring 

New products may not be coming out of Yahoo, but there’s plenty being produced at the nearly two dozen companies it has acquired since Mayer took over. The big one is obviously Yahoo’s $1.1 billion purchase of Tumblr, which currently has over 300 million monthly visitors. Mayer has also made plenty of acquisitions in the mobile space, looking to jump start the company’s presence in the industry’s fastest growing market.

Mayer, the morale booster

Possibly Mayer’s biggest contribution has been to energize employees at Yahoo.  The company had previously been hemorrhaging talent to other tech companies and suffering from dysfunctional management. Although she did do away with the popular “work from home” benefit, most of Wall Street took this as a sign that she meant business. Mayer also brought along a bunch of perks from her previous employer Google, introducing  free food, smartphones and fitness bands to the employees. Hiring is back up too. But most importantly, by being the face of the company and constantly being in the press, Mayer has created a palpable buzz around Yahoo, something it hasn’t enjoyed in years.

 

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